NODX decline suggests Singapore is "drastically" losing competitiveness

See why one economist thinks so.

Commenting after the release of Singapore's April non-oil domestic exports, DBS economist Irvin Seah said that external demand is not that weak so the recent slip in NODX could suggest that "Singapore is losing its competitive edge drastically, thereby affecting its domestic exports, and hence the performance of its manufacturing sector."

Here's the complete comment analysis from DBS:

May export performance has fallen short of expectation. Non-oil domestic exports (NODX) contracted by 4.6% YoY and 1.1% MoM sa. The key drag came from the electronics exports, which declined 13.2% YoY and outweighed the rise in non-electronic domestic exports (0.2% YoY).

The final outcome is somewhat a surprise since a weaker SGD in May would have helped to boost export performance. The SGD weakened by about 1% versus the greenback in May compared to the previous month. So, the poor export showing is most likely the result of sluggish demand. Without the SGD depreciation, it could have been worse.

That said, external demand couldn't possibly be that weak when the non-oil re-export (NORX) has recorded the best performance in recent years. It surged by 4.9% MoM sa in May, following a healthy 13.2% rise in the previous month. On a year-on-year basis, it was up by a stunning 19.1%, after a 16% expansion in Apr13. This is the fastest growth pace for NORX since Aug10.

So what does a weak NODX and strong NORX imply? One explanation that we can think of is that external demand is not that weak but Singapore is losing its competitive edge drastically, thereby affecting its domestic exports, and hence the performance of its manufacturing sector.

External headwinds will remain strong. Data from the US have been mixed and mostly down, although market seems to think otherwise and continue to flirt with thoughts of QE tapering. Europe is still stuck in recession although Germany's economic conditions are showing some modest upticks. Most Asia economies are still holding firm but China appears to be going through an internal consolidation.

The non-oil retained imports of intermediate goods (NORI) grew by SGD 0.6bn to reach SGD 5.2bn in May, compared to SGD 4.6bn in April. Hopefully that will be manifested in better export performance in the coming months. Nonetheless, the outlook remains clouded with uncertainties. Any improvement going forward will be a bonus.